zzlangerhans (99.81)

May Bottomfest

12

The GBMB hasn't been very active of late. I recently bought 3000 shares of Celldex at 3.3 after a dilutive financing, my first foray into that stock. I sold my Vical shares (too early of course) and Myrexis, and my trigger finger is poised on Idera and RTI. Interestingly, despite the frothy market I believe several quality biotechs have fallen back into GBMB range.

Prolor Biotech (PBTH) - market cap 282M, share price 5.21. Cash 26M, debt 0, quarterly burn 1-3M. I've been skeptical about Prolor due to their slow progression to clinical trials, which caused be to rechristen them Prolong Biotech. But they now have a critical upcoming catalyst in mid-2011, topline results for the phase II trial of hGH-CTP. Positive data will potentially advance that compound into phase III trials, and will also provide proof of concept for Prolor's wide array of CTP compounds in pre-clinical development. Based on the purely pharmacological endpoint of the phase II trial and reports of positive interim data, I estimate the probability of success in the trial to be about 70%. The bump in share price could be 50% or higher making this a potential options play as well as a long investment. I'm setting a GBMB threshold of 4.8 but there's a good possibility I might enter at a higher price if the stock remains stable.

Targacept (TRGT) - market cap 660M, share price 22.75. Cash 230M, debt 3M, quarterly burn 20-35M. The current cap and cash position do not reflect a recent 75M dilutive financing. Targacept entered the GBMB watchlist by virtue of a precipitous decline to the low 20's after touching 30 just two months ago. I've evaluated the pipeline in detail in my recent outperform pitch. Critical upcoming catalysts are decisions from AstraZeneca regarding further development of two pipeline candidates in H2 2011, as well as topline data from the phase III trial of TC-5214 as adjunct therapy for major depression in Q4 2011. Recall that impressive phase II data for TC-5214 is what elevate the share price from the 2's to the 20's in 2009. The share price was below 21 after the dilutive financing was announced but is now recovering. This is a GBMB buy below 20.

Delcath Systems (DCTH) - market cap 251M, share price 5.83. Cash 39M, debt 0, quarterly burn 6M. This extremely volatile stock is now approaching the lowest price since reporting positive results from the phase III trial of their PHP system in early 2010. I lost $2000 on an options bet against them so I'd love an opportunity to even the score. The most recent downward cycle was initiated by the FDA's surprising refusal to file the PHP NDA in 2/11. The company further disappointed investors by announcing they would not resubmit the NDA before the end of 2011. The apparent weakness of the NDA filing has renewed concerns about managerial competence, but I am confident that these worries will be abated once the NDA is resubmitted. There is a risk of another dilutive financing and further declines in share price prior to the next upswing, which leads me to label Delcath a lower priority GBMB buy with a threshold of 5.5.